You know, it should stand to reason that anyone serious about a free market economy would abhor the idea of state-run industries. Even so, several "small government" states have exactly that: state-run liquor stores. Here's an example of such lunacy in Idaho.

According to the state, in 2006 the Idaho Legislature appropriated around $15.2 million to the Idaho State Liquor Dispensary (ISLD) (1). The ISLD in turn generated nearly $110 million in sales in 2006. They spent around $58 million on product and around $14 million in operating expenses for a total net income of a little over $37 million (2). Not bad.

Of that $37 million, about $33 million of that went back to the state fund. After existing fund equity and warehouse remodeling were taken into account, they ended the year with a little under $12 million in the bank.

In 2007 the ISLD projects sales of $122 million (3). The Legislature gave them $16.6 million (4) and the process begins anew with the ISLD nearly $30 million in the black.

Now, you may say that over 200 percent return on investment in a year is a great deal. I don't disagree. However, I submit we can do even better. Consider what they do in Nebraska, which has a similar population to Idaho but doesn't have a state-run liquor monopoly. Nebraska spends around $850,000 on its liquor control board (5), but generates $26 million in liquor taxes (6). That's a 3,058 percent return on investment. That's what I'm talking about.

So will privatized booze increase drunk driving? Government studies indicate otherwise. A 2000 study by the National Highway Traffic Safety Administration showed a smaller percentage of traffic fatalities in Nebraska involved alcohol than they did in Idaho (7). As of 2004, Nebraska also had the lowest pedestrian fatality rate due to automobile accidents in the country (8).

In other words, we can continue to appropriate $16 million a year to a state-run industry to get $33 million, or we can privatize the industry, appropriate a fraction of that ($1 million at most) for a much smaller state liquor regulatory agency, still expect at least $25 million in liquor taxes, not have any ill effects with respect to drunk driving, and at the same time create at least a $10 million net profit industry in Idaho's private sector overnight. All this by repealing a few laws and rewriting others? Brilliant.

How come the "smaller government" Republican Legislature didn't do this?

SOURCES (all accessed 27 April 2007)

(1) FY 2008 Idaho Legislative Budget Book
(2) Idaho State Liquor Dispensary 2006 Annual Report
(3) ibid
(4) Senate Bill No. 1199, 2007 Idaho Legislature
(5) Nebraska Legislature (click on Appropriations Committee FY2007-08/FY2008-09 Budget Recommendations)
(6) Nebraska Liquor Control Commission - Historical Revenue
(7) NTSA - Transitioning to Multiple Imputation, p. 24
(8) U.S. Department of Transportation, Traffic Safety Facts 2004, p. 155